Redbox 2009 Annual Report Download

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HINGE HINGE

Table of contents

  • Page 1
    HINGE HINGE

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    ... ed db nd nates with re pa so 's ess, Coinstar ent, which re g 2009 we ex rental busin rcent. Durin e entertainm VD m pe D ho 17 e ic in ly rv e ar se nc ne ie e selfand conven t 8 points to Pioneering th e, simplicity rented almos delivers valu in DVD units ox e ar db sh Re t s. ke nships mar...

  • Page 4
    ..., Inc. Paul D. Davis Chief Executive Officer Coinstar, Inc. David M. Eskenazy Chief Financial Officer Aegis Senior Communities Daniel W. O'Connor President and Chief Executive Officer Retailnet Group, LLC Executive Officers Paul D. Davis Chief Executive Officer Gregg A. Kaplan Robert D. Sznewajs...

  • Page 5
    '4]`[9

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  • Page 7
    ...Address of principal executive offices) 98004 (Zip Code) (425) 943-8000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.001 par value The NASDAQ Stock Market LLC (Title of Each Class) (Name of Each Exchange on Which...

  • Page 8
    ... ...Item 9A. Controls and Procedures ...Item 9B. Other Information ...PART III Item 10. Directors, Executive Officers and Corporate Governance ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Item 13...

  • Page 9
    ... Automated Retail, LLC ("Redbox") under the terms of the LLC Interest Purchase Agreement dated November 17, 2005. In conjunction with the option exercise and payment of $5.1 million, our ownership interest increased from 47.3% to 51.0%. Since our original investment in Redbox, we had been accounting...

  • Page 10
    ... a valid credit or debit card, and receive their movie(s). The process is designed to be fast, efficient and fully automated with no membership fees. DVD services revenue comprised 67% of total consolidated revenue for 2009. Typically, the DVD rental price is a flat fee plus tax for one night and if...

  • Page 11
    ... location. Our DVD kiosks are available in all states in the continental United States, Puerto Rico and the United Kingdom and offer our consumers a convenient home entertainment solution. We generate revenue primarily through fees charged to rent or purchase a DVD, and pay retailers a percentage...

  • Page 12
    ... affecting our ability to profitably manage our DVD services business. We have invested, and plan to continue to invest, substantially to establish our nationwide infrastructure of DVD rental kiosks. The home video distribution market is rapidly evolving as new technologies and distribution channels...

  • Page 13
    ..., sporting events and video gaming. Changes in consumer content delivery preferences, including DVDs with higher picture/sound quality (e.g., Blu-ray), disposable or download-to-burn DVDs, more use of personal video recorders (e.g., TiVo), pay-per-view/cable/satellite and similar technologies...

  • Page 14
    ...DVD releases or making video-on-demand/computer downloads/online streaming available prior to DVD release. For example, there have been recent announcements that certain movie studios have made new release titles available on video-on-demand or for online purchase on the same date as the DVD release...

  • Page 15
    ... second half of 2011 pursuant to the terms of the respective agreements. In addition, we have a licensing arrangement with Warner Home Video that makes DVDs available for rental 28 days after the street date (whether on a rental or sell-through basis). Our business, financial condition and results...

  • Page 16
    ..., for home entertainment viewing could adversely affect our DVD services business," our Redbox subsidiary has filed separate actions in federal court against certain movie studios relating to new distribution terms implemented or proposed by such studios that would restrict certain rental and sales...

  • Page 17
    ... plan for locating kiosks. Because of our limited operating history and because the DVD rental kiosk market and our business model for DVD services is rapidly evolving, we have very limited data and track records for predicting kiosk and market performance in future periods. As a result, we may make...

  • Page 18
    ... automated retail space to provide the consumer with convenience and value and to help retailers drive incremental traffic and revenue. If we cannot execute on our strategy, our business could suffer. To be competitive, we need to develop or otherwise provide new product and service offerings that...

  • Page 19
    ...related fees charged by any of these competitors or retailer decisions to use floor space for other than coin-counting, could materially and adversely affect our business and results of operations. Our DVD business faces competition from many other providers of movie content, from traditional stores...

  • Page 20
    ... in selling their e-payment services than we are and many invest more resources in providing such services to consumers, such as InComm in the prepaid wireless and long distance markets, Blackhawk Network in the stored value cards and debit card markets and Western Union in the money transfer market...

  • Page 21
    ... fees paid or other financial concessions made to our retailers could significantly increase our direct operating expenses in future periods and harm our business. Events outside of our control, including the current economic environment, has and could continue to negatively affect consumers' use...

  • Page 22
    ... our financial condition, operating results and liquidity as well as our business generally. Defects, failures or security breaches in and inadequate upgrade of or changes to our operating systems could harm our business. The operation of the coin-counting, DVD, money transfer and e-payment machines...

  • Page 23
    ... terms; the amount of service fees that we pay to our retailers; the transaction fees we charge consumers to use our services; fluctuations in consumer spending patterns; the successful operation of our coin-counting, DVD, money transfer and e-payment network; fluctuations in operating expenses...

  • Page 24
    ...states and the District of Columbia which require licenses with regard to provision of some of our e-payment services, including stored value card and money transfer transactions. There can be no assurance that we will be granted all necessary licenses or permits in the future, that current licenses...

  • Page 25
    ... tax, tariff and trade regulations, difficulties with foreign distributors and other difficulties in managing an organization outside the United States, could seriously harm the development of our business and ability to operate profitably. Further, as we do more business in an increasing number...

  • Page 26
    ... money transfers, and certain of our telecommunication providers. In the event of a breakdown, catastrophic event, security breach, improper operation or any other event impacting our systems or network or our vendors' systems or processes, or improper or other actions taken by our agents, employees...

  • Page 27
    ...money transfer and e-payment services machines and equipment used in our business. Severe weather, natural disasters and other events beyond our control can, for extended periods of time, significantly reduce consumer use of our products and services as well as interrupt the ability of our employees...

  • Page 28
    ... in the use of our coin, DVD, money transfer and e-payment services; developments in our contractual obligations or litigation with movie studios and DVD distributors; operating results below market expectations and changes in, or our failure to meet, financial estimates of securities analysts or...

  • Page 29
    ..., 2009, Redbox executed a lease for Redbox corporate office space in Oakbrook Terrace, Illinois. The lease is anticipated to commence on August 1, 2010 and provides for a term of approximately 11 years. Redbox will rent 136,925 square feet under the new lease. Our primary E-payment office is located...

  • Page 30
    ...reported sale price of our common stock on the NASDAQ Global Select Market on February 12, 2010 was $26.61 per share. Holders As of February 12, 2010, there were 127 holders of record of our common stock. This does not include the number of persons whose stock is in nominee or "street name" accounts...

  • Page 31
    ...Financial Statements of Coinstar, Inc. and related Notes thereto included elsewhere in this Annual Report. On January 1, 2008, we exercised our option to acquire a majority ownership interest in the voting equity of Redbox Automated Retail, LLC ("Redbox") under the terms of the LLC Interest Purchase...

  • Page 32
    2009 Year Ended December 31, 2008 2007 2006 (in thousands, except per share data) 2005 CONSOLIDATED STATEMENT OF OPERATIONS: REVENUE ...$1,144,791 $ EXPENSES: Direct operating ...793,444 Marketing ...22,757 Research and development ...5,312 General and administrative ...127,033 Depreciation and ...

  • Page 33
    ... in this Annual Report. Overview We are a leading provider of automated retail solutions offering convenient products and services that benefit consumers and drive incremental retail traffic and revenue for retailers. Our core offerings in automated retail include our Coin and DVD businesses. Our...

  • Page 34
    ... each location that has a Redbox DVD kiosk in the United States. Under the Paramount Agreement, Redbox should receive delivery of the DVDs by the "street date," defined in the Paramount Agreement as the initial date on which the movies are distributed on a rental basis to the general public for home...

  • Page 35
    physical home video formats to consumers, whether on a rental or sell-through basis. In addition, and pursuant to the terms of the Warner Agreement, Redbox voluntarily dismissed its lawsuit against Warner relating to Redbox's access to Warner titles. Management of Business Segments In early 2008, we...

  • Page 36
    ... location. Our DVD kiosks are available in all states in the continental United States, Puerto Rico and the United Kingdom and offer our consumers a convenient home entertainment solution. We generate revenue primarily through fees charged to rent or purchase a DVD, and pay retailers a percentage...

  • Page 37
    ... a direct sale out of the kiosk of previously rented movies is recognized at the time of sale. On rental transactions for which the related DVDs have not yet been returned to the kiosk at month-end, revenue is recognized with a corresponding receivable recorded in the balance sheet, net of a reserve...

  • Page 38
    ..., DVD services, Money Transfer services and E-payment services. We have estimated the fair value of our four reporting units using both income and market approaches. We applied a discounted cash flow analysis to estimate the fair value of our core businesses, Coin and DVD services, and market prices...

  • Page 39
    ... risk-free interest rate is based on the implied yield available on United States Treasury zero-coupon issues with an equivalent remaining term. We have not paid dividends in the past and do not plan to pay any dividends in the foreseeable future. Convertible debt: In September 2009, we issued $200...

  • Page 40
    ... borrowing rate when interest cost is recognized in subsequent periods. The accounting guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We adopted this new accounting guidance on January 1, 2009...

  • Page 41
    ... and a one-time tax benefit of $82.2 million during the third quarter of 2009. We have presented the result of the disposition of our Entertainment Business as well as the operating loss from our Entertainment Business as discontinued operations in our Consolidated Statement of Operations, for all...

  • Page 42
    ... and Entertainment services, DVD services, Money Transfer services and E-payment services in early 2008. We have not restated comparable segment information for 2007 because it would be impracticable for us to do so. With the sale of the Entertainment Business during the third quarter of 2009 we now...

  • Page 43
    ... the reduction in profit in 2008 from 2007 as a result of a one-time excise tax refund of $11.8 million recorded in 2007. Segment Revenue/Operating income (loss) In early 2008, we assessed our business segments due to changes in our business and product lines as well as our organizational structure...

  • Page 44
    ...in DVD salvage values, higher costs associated with purchasing certain DVD titles from alternative procurement sources, and increased general and administration expenses to sustain the growth of the segment. The decline in DVD services segment operating income as a percentage of revenue for the year...

  • Page 45
    ... of our DVD library, (2) transaction fees and commissions we pay to our retailers and agents, (3) credit card fees and coin pick-up, transportation and processing expenses, and (4) field operations support. Variations in the percentage of transaction fees and commissions we pay to our retailers and...

  • Page 46
    ... acquisition of GroupEx in January 2008. The increase in marketing expenses for Redbox and GroupEx were $6.8 million and $1.2 million, respectively. Research and Development Year Ended December 31, 2009 2008 $ Chng % Chng 2007 $ Chng (In millions, except percentages) % Chng Research and development...

  • Page 47
    ... of the DVD services segment, including increased personnel, as well as certain corporate management transition costs. Fiscal year 2008 compared with fiscal year 2007 General and administrative expenses increased in dollars, although decreased as a percentage of revenue, for the year ended December...

  • Page 48
    ... acquisition of GroupEx in January 2008. The increase in amortization expenses for GroupEx and Redbox were $2.0 million and $0.5 million, respectively. Other Income and Expense and Non-controlling Interests 2009 2008 Year Ended December 31, $ Chng % Chng 2007 $ Chng (In millions, except percentages...

  • Page 49
    ... as recorded in "accrued payable to retailers and agents" in the Consolidated Balance Sheet). Working capital was $16.1 million as of December 31, 2009, compared with a working capital deficit of $(16.3) million as of December 31, 2008. The increase in working capital was primarily due to the timing...

  • Page 50
    ...to 2008 due to DVD services accounts payable balances that grew during 2008 but stabilized in 2009 and an excise tax refund received in 2008. Cash used by working capital also increased due to the timing of payments to vendors. These increases in cash used by working capital over the prior year were...

  • Page 51
    ... percentage in Redbox from 47.3% to 51.0%, both of which took place in January 2008. Our purchase of property and equipment increased during 2009 compared to 2008 primarily due to increased spending in our DVD segment. Net cash used by investing activities from continuing operations for the year...

  • Page 52
    ... and Restated Credit Agreement provided for a new term loan, proceeds of which, net of fees and closing costs, were used to pay a portion of the deferred consideration payable by us in connection with our purchase of the outstanding interests in Redbox on February 26, 2009. We paid off the term loan...

  • Page 53
    ...entered into a Rollout Purchase, License and Service Agreement (the "Rollout Agreement") giving McDonald's USA and its franchisees and franchise marketing cooperatives the right to purchase DVD rental kiosks to be located at selected McDonald's restaurant sites for which Redbox subsequently received...

  • Page 54
    ... consumer use of our services, the timing and number of machine installations, the number of available installable machines, the type and scope of service enhancements and the cost of developing potential new product, service offerings, and enhancements and cash required to fund future acquisitions...

  • Page 55
    ... future assumptions including pricing estimates, estimated number of locations, estimated titles in kiosks, and estimated title counts. Amount of Commitment Expiration by Period Less than 1 1-3 4-5 After 5 Total year years years years (in thousands) Other Commercial Commitments Letters of credit...

  • Page 56
    ..., 2011. The term of the $75.0 million swap is through October 28, 2010. We are further subject to the risk of foreign exchange rate fluctuation in the normal course of business as a result of our operations in the United Kingdom, Ireland, Europe, Canada, and Mexico. Item 8. Financial Statements and...

  • Page 57
    ... the periods. The operating results for any quarter are not necessarily indicative of the results for future periods. Certain reclassifications have been made to the prior period balances to conform with the current year presentation. Dec. 31, 2009(2) Sept. 30, 2009(1) Three Month Periods Ended June...

  • Page 58
    ...Chief Executive Officer and Interim Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2009 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set...

  • Page 59
    ... our 2010 Annual Meeting of Stockholders. Item 11. Executive Compensation. The information required by this item is incorporated herein by reference to the Proxy Statement relating to our 2010 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and...

  • Page 60
    ...Report on Form 10-K and the Company's other public filings, which are available without charge through the SEC's website at http://www.sec.gov. Exhibit Number Description of Document 2.1 2.2 LLC Interest Purchase Agreement dated November 17, 2005 by and among Redbox Automated Retail, LLC, McDonald...

  • Page 61
    ... First Supplemental Indenture, dated as of September 16, 2009, between Coinstar, Inc. and Wells Fargo Bank, N.A.(9) Form of 4.00% Senior Convertible Note due 2014. Reference is made to Exhibit A of Exhibit 4.6.(9) Amended and Restated 1997 Non-Employee Directors' Stock Option Plan.(10) 2000 Amended...

  • Page 62
    ... of Incentive Payments.(13) Form of Change of Control Agreement.(20) First Amendment to Form of Change of Control Agreement.(13) Stock Option Agreement, Grant to Chief Executive Officer dated October 8, 2001.(21) Employment Agreement between David W. Cole and Coinstar, Inc. dated January 1, 2004...

  • Page 63
    ...-owned subsidiary of Coinstar, Inc., as amended June 6, 2003.(31) Standard Office Lease, effective December 22, 2009, between Long Ridge Office Portfolio, L.P. and Redbox Automated Retail, LLC. Voting Agreement between Levine Investments Limited Partnership and Coinstar, Inc. dated November 1, 2005...

  • Page 64
    ...Inc.(35) Purchase and Sale Agreement between Coinstar, Inc., Sesame Holdings, Inc. and GARB, LLC dated February 26, 2009.(8) Third Amended and Restated Limited Liability Company Agreement of Redbox Automated Retail, LLC.(13) Subsidiaries. Consent of Independent Registered Public Accounting Firm-KPMG...

  • Page 65
    ... by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 (File Number 000-22555). (15) Incorporated by reference to Appendix A of the Registrant's Definitive Proxy Statement on Form DEF 14A filed on May 4, 2009 (File Number 000-22555). (16) Incorporated by...

  • Page 66
    ... its behalf by the undersigned, thereunto duly authorized. Coinstar, Inc. By: /s/ JAMES A. BLANDA JAMES A. BLANDA Interim Chief Financial Officer Date: February 23, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 67
    ... the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Coinstar, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, equity and comprehensive income (loss), and cash flows for each of the years in...

  • Page 68
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Coinstar, Inc.: We have audited the accompanying consolidated balance sheets of Coinstar, Inc. and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the related consolidated statements of...

  • Page 69
    ......LONG-TERM DEBT AND OTHER ...CAPITAL LEASE OBLIGATIONS ...DEFERRED TAX LIABILITY ...TOTAL LIABILITIES ...COMMITMENTS AND CONTINGENCIES EQUITY: Preferred stock, $0.001 par value-Authorized, 5,000,000 shares; no shares issued and outstanding at December 31, 2009 and December 31, 2008 ...Common stock...

  • Page 70
    ..., INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2009 2008 2007 REVENUE ...EXPENSES: Direct operating(1) ...Marketing ...Research and development ...General and administrative ...Depreciation and other(1) ...Amortization of intangible...

  • Page 71
    ...Interest rate hedges on long-term debt net of tax benefit of $2,912 ...Total comprehensive loss ...BALANCE, December 31, 2008 ...28,255,070 $369,735 Proceeds from exercise of stock options, net ...748,601 16,014 Stock-based compensation expense ...131,863 7,322 Shares issued for DVD agreement ...193...

  • Page 72
    ... deferred financing fees ...9,386 Write-off of acquisition costs ...1,262 Non-cash stock-based compensation for employees ...7,671 Share-based payments for DVD agreement ...1,410 Excess tax benefit on share-based awards ...- Deferred income taxes ...14,494 Income from equity investments ...- (Income...

  • Page 73
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 NOTE 1: ORGANIZATION AND BUSINESS Description of company: We are a leading provider of automated retail solutions offering convenient products and services that benefit consumers and drive ...

  • Page 74
    ... investments are classified as available-for-sale and are stated at fair value. Our available-for-sale securities have maturities of one year or less and are reported at fair value based on quoted market prices and are included in the balance sheet caption "Prepaid expenses and other current assets...

  • Page 75
    ..., DVD services, Money Transfer services and E-payment services. We have estimated the fair value of our four reporting units using both income and market approaches. We applied a discounted cash flow analysis to estimate the fair value of our core businesses, Coin and DVD services, and market prices...

  • Page 76
    ...we pay our retailers for the benefit of placing our machines in their stores and their agreement to provide certain services on our behalf to our consumers. The fee is generally calculated as a percentage of each coin-counting transaction or as a percentage of our net DVD revenues and is recorded in...

  • Page 77
    ...and liabilities related to these operations to U.S. dollars at the exchange rate in effect at the date of the Consolidated Balance Sheets; we convert revenues and expenses into U.S. dollars using the average monthly exchange rates. Translation gains and losses are reported as a separate component of...

  • Page 78
    ...free interest rate is based on the implied yield available on United States Treasury zero-coupon issues with an equivalent remaining term. We have not paid dividends in the past and do not plan to pay any dividends in the foreseeable future. FASB ASC 810-10 requires the benefits of tax deductions in...

  • Page 79
    ... 360-10-45 at the balance sheet date. Upon being classified as held for sale, the recoverability of the carrying value of the business must be assessed, and the business held for sale is reported at the lower of its carrying value or fair value less cost to sell. Discontinued operations- We define...

  • Page 80
    ... December 2007, the FASB issued FAS 141 (revised 2007), which is now incorporated within FASB ASC 805. FASB ASC 805 retains the fundamental requirements of FASB Statement No. 141 to account for all business combinations using the acquisition method (formerly the purchase method) and for an acquiring...

  • Page 81
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 NOTE 3: ACQUISITIONS In connection with our acquisitions, we have allocated the respective purchase prices plus transaction costs to the estimated fair values of the tangible and ...

  • Page 82
    ...tax benefit was adjusted during 2009 due to a change in tax rate, which resulted in the increase of the deferred tax benefit of $0.5 million. As of December 31, 2009, the net difference was $56.3 million in the equity section of our Consolidated Balance Sheets. NOTE 4: SALE OF ENTERTAINMENT BUSINESS...

  • Page 83
    ... at the reported balance sheet dates were as follows: Estimated December 31, Range of Weighted 2009 2008 Estimated Average Useful Lives Useful Lives Gross Accumulated Gross Accumulated (in years) (in years) Amount Amortization Amount Amortization (in thousands) Intangible assets: Retailer and agent...

  • Page 84
    ...December 31: 2009 2008 (in thousands) Payroll related expenses ...Interest payable ...Taxes payable ...Accrued professional fees ...Service contract providers ...Accrued medical insurance ...Accrued workers' compensation and auto insurance ...Accrued acquisition costs ...Interest rate swap ...Other...

  • Page 85
    ...Restated Credit Agreement provided for a new term loan, proceeds of which, net of fees and closing costs, have been used to pay a portion of the deferred consideration payable by us in connection with our purchase of the outstanding interests in Redbox on February 26, 2009. We paid off the term loan...

  • Page 86
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 amount of the Notes for each day of that period is less than 98% of the product of the closing sale price of our common stock and the applicable conversion rate; (iv) we elect to ...

  • Page 87
    ...license fee earned by McDonald's USA and its franchisees. As of December 31, 2009, included in current and long-term debt in our Consolidated Balance Sheets was debt associated with the Rollout Agreement of $17.6 million. NOTE 9: COMMITMENTS Lease commitments: Our corporate administrative, marketing...

  • Page 88
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 We have entered into capital lease agreements to finance the acquisition of certain automobiles. These capital leases have terms of 36 to 96 months at imputed interest rates that range...

  • Page 89
    ... direct-to-video DVDs for rental in each location that has a Redbox DVD kiosk in the United States. Under the Lionsgate Agreement, Redbox should receive delivery of the DVDs by the "street date," defined in the Lionsgate Agreement as the initial date on which the movies are distributed on a rental...

  • Page 90
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 Under the Paramount Agreement, Redbox agrees to license minimum quantities of theatrical and direct-to-video DVDs for rental in each location that has a Redbox DVD kiosk in the United ...

  • Page 91
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 The following table summarizes stock-based compensation expense, and the related deferred tax benefit for stock option and award expense: Year Ended December 31, 2009 2008 2007 (in ...

  • Page 92
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 require no payment from the grantee and compensation cost is recorded based on the market price on the grant date and is recorded equally over the vesting period. Compensation expense ...

  • Page 93
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 The components of income tax expense were as follows: December 31, 2009 2008 (in thousands) 2007 Current: United States federal ...State and local ...Foreign ...Total current ......

  • Page 94
    ... financial reporting purposes and the carrying amounts used for income tax purposes. Future tax benefits for net operating loss and tax credit carryforwards are also recognized to the extent that realization of such benefits is more likely than not. In determining our fiscal 2009, 2008 and 2007 tax...

  • Page 95
    ... 31, 2009, we recorded U.S. federal tax credits of $8.2 million. The tax credits consist of $1.5 million of foreign tax credits that expire from the years 2016 to 2019, $2.2 million of research and development tax credits including a reserve of ($0.6) million that expires from the years 2011 to 2030...

  • Page 96
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 The income tax benefit from stock option exercises in excess of the amounts recognized in the Consolidated Statements of Operations was approximately zero in 2009 and 2008, and ...

  • Page 97
    ... plan were $0.5 million in 2009 and $0.3 million in 2008. NOTE 15: BUSINESS SEGMENT INFORMATION FASB ASC 280, Segment Reporting, requires that companies report separately in the financial statements certain financial and descriptive information about segment revenues, income and assets. The method...

  • Page 98
    ... from operations, by segment, for the period indicated: Year Ended December 31, 2009 2008 (in thousands) Operating income before depreciation/amortization and stock-based compensation/ share-based payments: Coin services ...DVD services ...Money transfer services ...E-payment services ...Subtotal...

  • Page 99
    ... includes the United States, Canada, Mexico and Puerto Rico and International primarily includes the United Kingdom, Ireland and other European countries in which our money transfer subsidiary, Coinstar Money Transfer, operates. Year Ended December 31, 2009 2008 2007 (in thousands) Revenue: North...

  • Page 100
    ..., DVD, Money Transfer and E-payment services are primarily located within retailers. The following retailers accounted for 10% or more of our consolidated revenue: Year Ended December 31, 2009 2008 2007 Wal-Mart Stores Inc ...Walgreen Co ...McDonald's USA ...Supervalu ...The Kroger Company ...NOTE...

  • Page 101
    ... AND OTHER TRANSACTIONS During the third quarter of 2007, direct operating expenses in our income statement included a telecommunication fee refund in the amount of $11.8 million as a result of an Internal Revenue Service ruling that telecommunication fees paid during the period of March 1, 2003...

  • Page 102
    ...Short-term investments is included in Prepaid expenses and other current assets in our Consolidated Balance Sheets. NOTE 19: SUPPLEMENTAL CASH FLOW INFORMATION Year Ended December 31, 2009 2008 2007 (in thousands) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION FOR CONTINUING OPERATIONS: Cash paid...

  • Page 103
    COINSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 NOTE 20: SUBSEQUENT EVENTS Warner agreement On February 12, 2010, our Redbox subsidiary entered into a rental revenue sharing agreement (the "Warner Agreement") with Warner Home Video ...

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    ... are plotted below as of December 31 of each fiscal year shown. The stock price performance shown in the graph is historical and not necessarily indicative of future price performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG COINSTAR, INC., THE NASDAQ COMPOSITE INDEX AND THE RUSSELL 2000...

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    Cert no. SCS-COC-000648 HINGE HINGE